Lesson 2

Levels of
Management
Levels of Management
As a small business grows, it should be
concerned about the levels or the layers of
management. Also referred to as
the management hierarchy , there are typically
three levels of management: top or executive,
middle, and first-line or supervisory. To meet a
company’s goals, there should be coordination
of all three levels.

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Figure 3 The Management Hierarchy

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1.Top Management, also referred to as the executive level,
guides and controls the overall fortunes of a business. This level
includes such positions as the president or CEO, the chief
financial officer, the chief Top managers devote most of their
marketing officer, and executive vice presidents. r time to
developing the mission, long-range plans, and strategy of a
business—thus setting its direction. They are often asked to
represent the business in events at educational institutions,
community activities, dealings with the government, and seminars
and sometimes as a spokesperson for the business in
advertisements. It has been estimated that top managers spend 55
percent of their time planning.

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2. Middle Management is probably the largest group of
managers. This level includes such positions as regional manager,
plant manager, division head, branch manager, marketing
manager, and project director. Middle managers, a conduit
between top management and first-line management, focus on
specific operations, products, or customer groups within a business.
They have responsibility for developing detailed plans and
procedures to implement a firm’s strategic plans.David L.
Kurtz, Contemporary Business, 13th Edition Update (Hoboken, NJ:
John Wiley & Sons, 2011), 255.

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3. First-line or supervisory management is
the group that works directly with the people who produce
and sell the goods and/or the services of a business; they
implement the plans of middle management. They
coordinate and supervise the activities of operating
employees, spending most of their time working with and
motivating their employees, answering questions, and
solving day-to-day problems. Examples of first-line
positions include supervisor, section chief, office
manager, foreman, and team leader.
 

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In many small businesses, people often wear multiple hats. This
happens with management as well. One person may wear hats at
each management level, and this can be confusing for both the
person wearing the different hats and other employees. It is
common for the small business owner to do mostly first-level
management work, with middle or top management performed only in
response to a problem or a crisis, and top-level strategic work rarely
performed. This is not a good situation. If the small business is large
enough to have three levels of management, it is important that there
be clear distinctions among them—and among the people who are in
those positions. The small business owner should be top
management only. This will eliminate confusion about responsibilities
and accountabilities.
 

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Management Skills
Management skill “is the ability to carry out
the process of reaching organizational goals
by working with and through people and
other organizational resources. Possessing
management skill is generally considered a
requirement for success. An effective manager
is the manager who is able to master four basic
types of skills: technical, conceptual,
interpersonal, and decision making.
 
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Technical skills “are the manager’s ability to
understand and use the techniques, knowledge,
and tools and equipment of a specific discipline
or department. These skills are mostly related to
working with processes or physical objects.
Engineering, accounting, and computer
programming are examples of technical
skills. Technical skills are particularly important
for first-line managers and are much less
important at the top management level. The need
for technical skills by the small business owner will
depend on the nature and the size of the business.
 
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Conceptual skills “determine a manager’s
ability to see the organization as a unified whole
and to understand how each part of the overall
organization interacts with other parts These
skills are of greatest importance to top management
because it is this level that must develop long-range
plans for the future direction of a business.
Conceptual skills are not of much relevance to
the first-line manager but are of great importance
to the middle manager. All small business owners
need such skills.

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Interpersonal skills “include the ability to
communicate with, motivate, and lead employees
to complete assigned activities. hopefully building
cooperation within the manager’s team. Managers
without these skills will have a tough time
succeeding. Interpersonal skills are of greatest
importance to middle managers and are somewhat
less important for first-line managers. They are of
least importance to top management, but they are still
very important. They are critical for all small business
owners.
 

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Decision making , the ability to identify a
problem or an opportunity, creatively
develop alternative solutions, select an
alternative, delegate authority to implement
a solution, and evaluate the solution.John M.
Ivancevich and Thomas N. Duening, Business:
Principles, Guidelines, and Practices (Mason,
OH: Atomic Dog Publishing, 2007), 188.

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 Figure .4 Management Decision Making
 

Making good decisions is never easy, but doing so is clearly related to small business success. “Decisions
that are based on a foundation of knowledge and sound reasoning can lead the company into long-term
prosperity; conversely, decisions that are made on the basis of flawed logic, emotionalism, or incomplete
information can quickly put a small business out of commission

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A Framework for Ethical Decision Making
Small business decisions should be ethical decisions.
Making ethical decisions requires that the decision maker(s)
be sensitive to ethical issues. In addition, it is helpful to
have a method for making ethical decisions that, when
practiced regularly, becomes so familiar that it is automatic.
 
The Markkula Center for Applied Ethics recommends the
following framework for exploring ethical dilemmas and
identifying ethical courses of action. However, in many if not
most instances, a small business owner or manager and an
employee will usually know instinctively whether a particular
decision is unethical.
 
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1. Recognize an Ethical Issue
 Could this decision or situation be damaging
to someone or some group? Does this
decision involve a choice between a good
and a bad alternative or perhaps between
two “goods” or between two “bads”?
 Is this issue about more than what is legal or
most efficient? If so, how?

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2. Get the Facts
 What are the relevant facts of the case? What
facts are not known? Can I learn more about the
situation? Do I know enough to make a decision?
 What individuals and groups have an important
stake in the outcome? Are some concerns more
important? Why?
 What are the options for acting? Have all the
relevant persons and groups been consulted?
Have I identified creative options?

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3. Evaluate Alternative Actions
 Which option will produce the most good and do
the least harm?
 Which option best respects the rights of all who
have a stake?
 Which option treats people equally or
proportionately?
 Which option best serves the community as a
whole, not just some members?
 Which option leads me to act as the sort of
person I want to be?
 

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4. Make a Decision and Test It
 Considering all these approaches,
which option best addresses the
situation?
 If I told someone I respect—or told a
television audience—which option I
have chosen, what would they say?

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5. Act and Reflect on the Outcome
 How can my decision be implemented with
the greatest care and attention to the
concerns of all stakeholders?
 How did my decision turn out, and what
have I learned from this specific situation?
 

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KEY TAKEAWAYS
 Management principles are important to all small
businesses.
 Management decisions will impact the success of a
business, the health of its work environment, its growth if
growth is an objective, and customer value and
satisfaction.
 Management is about achieving organizational objectives
through people.
 The most common reason attributed to small business
failure is failure on the part of management.

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 On any given day, a typical small business owner or manager will
be engaged in some mix of planning, organizing, staffing,
directing, and controlling.
 Different situations call for different leadership styles. The three
major styles are autocratic, democratic, and laissez-faire. Bad
leaders typically stick with one style.
 The management hierarchy is typically composed of three levels:
top or executive, middle, and first-line or supervisory. If a small
business is large enough to have these three levels, it is important
that there be a clear distinction between them.
 Management skills are required for success. Technical,
conceptual, interpersonal, and decision-making skills will be of
differing importance depending on the management level.

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Activities/Assessment:
 
Apply the four steps in the controlling function for
1.

Frank’s BarBeQue. Identify and discuss examples of

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 2. Venn Diagram Analysis

M
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PROS G
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CONS
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